Friday, 13 March 2009

If one is prepared to take at face value the surge through two key moving averages in Friday’s trading of the Nikkei 225 this could be said to be paving the way for further upside momentum in coming sessions in the US.

My only hesitation and the reason for saying at face value is that there has been a tendency in previous bear market rallies for these false breakouts to appear. A key descending trendline has been broken or a break above a pivotal moving average is made only for relapses to occur.

But casting scepticism aside for the present and simply absorbing what the charts are currently telling us the financial world is definitely becoming more cheerful (although average citizens certainly don’t seem to be).

We may be witnessing a seismic shift where the fear from money managers is less one of losing their jobs because client redemptions have edged up relentlessly, to a fear of getting left behind as their peers are outperforming them. This is the paradox of how markets are moved by how average opinion perceives average opinion, and this was so eloquently expressed by Keynes in connection with the judging of a beauty contest.